Arizona Corp. Commission Poised To Seek AG's Opinion Regarding Existing Retail Choice Statutes, Rules In Light of Two Court Cases

Subject to confirmation in a future vote, the Arizona Corporation Commission currently intends to request, pursuant to A.R.S. § 41-193(A)(7), an Attorney General Opinion regarding the statutes the Legislature established in A.R.S. § 40-202(B), (C), (D), and (E), and §§ 40-207–208, concerning electricity restructuring, and the status of A.A.C. § R14-2-1601 et seq., concerning previously adopted electric choice administrative rules, in light of the Arizona Constitution, article XV, §§ 3, 6, 12, & 14, Phelps Dodge Corp. v. Arizona Elec. Power Co-op., Inc., 207 Ariz. 95 (Ct. App. 2004), which invalidated the prior choice rules, and Johnson Utilities, L.L.C. v. Arizona Corp. Comm'n, 249 Ariz. 215 (2020), which establishes that, outside of ratemaking, the legislature's authority is paramount

As previously reported, a recent court case concerning a water utility (Johnson Utilities) clarified that the ACC lacks plenary authority, or the ability to supersede prior legislative mandates, in areas which do not infringe on the ACC's exclusive ratemaking authority

See a full discussion of the issues concerning electric choice in Arizona in light of the Johnson Utilities case in our prior story here

As previously reported (story here), in light of the recent Johnson Utilities case, Commissioner Justin Olson in an memo this summer urged the ACC to comply with "paramount" state law, which requires that the ACC direct the electric utilities to open their territories to electric choice, and requires the ACC to adopt rules for electricity competition

See more background on existing statute requiring the opening of electric utilities to competition here

The 2004 Phelps Dodge decision invalidated the ACC's original rules to implement retail electric choice. However, while some rules were denied on state constitutional grounds, others were rejected solely on administrative procedural grounds.

As previously reported, Green Mountain Energy has applied at the ACC for a Certificate of Convenience and Necessity (CC&N) to provide competitive electric generation service in Arizona in accordance with the state's Energy Competition Act. Applications for CC&Ns from other suppliers have been pending at the ACC for years

At a recent Staff meeting earlier this month, a 4-1 majority of Commissioners voted to have the ACC's legal division draft a letter which would request an opinion from the state's Attorney General on the choice statutes and prior rules in light of both court cases. Commissioners will review the draft and take another vote on approving and sending such request to the AG at a subsequent Staff meeting

ACC Chairwoman Lea Márquez Peterson called seeing Green Mountain's recent CC&N application "startling", and expressed concern about putting Commission resources into something that the ACC doesn't have authority to do, and thus favored seeking an AG opinion.

Márquez Peterson said that the AG's opinion would, "provide[] the clarity we need."

While in favor of seeking an AG opinion, Commissioner Jim O'Connor stressed that consideration of any pending CC&N applications should not wait for the AG to issue the sought opinion. The AG's opinion shouldn't be used to delay consideration of the pending competitive supplier CC&N applications, O'Connor said

Olson said that the ACC's authority is clear in light of Johnson Utilities and said that the AG's opinion is unnecessary. Olson likewise expressed concern that the request for the AG's opinion would delay consideration of the pending competitive supplier CC&Ns. Olson further noted that to the extent the ACC's authority is challenged, the state's Supreme Court would decide the question, and the AG's opinion is merely advisory

Because the Green Mountain CC&N application docket was not on the agenda for the Staff meeting earlier this month, Commissioners could not substantively discuss the case's procedural status as Olson sought assurance that the AG's opinion would not delay the schedule in the Green Mountain case

As such, Olson has filed a new memo requesting that both the Green Mountain docket, and the consideration of requesting the opinion from the AG, be placed on the agenda for the ACC's next Staff meeting (Sept. 30), to confirm whether the request for an opinion from the AG will delay the processing of Green Mountain Energy's application

While the ACC's Legal division said during the Staff meeting that the ACC may be able to proceed with consideration of the CC&Ns without the AG's opinion, there are outstanding questions that could be informed by such AG opinion, such as: what, if anything, does the ACC need to do with the prior choice rules impacted by Phelps Dodge; is another rulemaking needed; can the ACC issue a competitive CC&N without rules?

Docket E-21160A-21-0279